ALLIANT ENERGY CORP annual report, FY2019

Alliant Energy Corporation 2019 Form 10-K Summary

Reporting period: Fiscal year ended December 31, 2019. The filing is a combined Form 10-K for Alliant Energy Corporation, Interstate Power and Light Company (IPL), and Wisconsin Power and Light Company (WPL); it is not a standalone fourth-quarter filing. Alliant Energy is a regulated Midwest utility holding company serving approximately 970,000 electric and 420,000 natural gas customers through IPL in Iowa and WPL in Wisconsin.

Business Context

Utility operations comprise regulated electric, gas, and IPL steam businesses. Alliant Energy also owns non-utility transportation assets, a 16% interest in American Transmission Company, a 50% cash-equity interest in an Oklahoma wind farm, and the Sheboygan Falls Energy Facility.
Alliant Energy employed 3,597 people at year-end; 54% were covered by collective bargaining agreements. IPL and WPL employed 1,418 and 1,153 people, respectively.
The company is transitioning its generation portfolio toward wind, solar, and efficient natural gas generation while planning retirements or fuel switching for older coal units.

Key Financial Metrics

Alliant Energy consolidated	2019	2018	Change
Revenue	$3,647.7 million	$3,534.5 million	Up 3.2%
Operating income	$777.7 million	$694.4 million	Up 12.0%
Net income attributable to common shareowners	$557.2 million	$512.1 million	Up 8.8%
Diluted EPS	$2.33	$2.19	Up 6.4%
Operating margin	21.3%	19.6%	Up 1.7 percentage points
Net margin	15.3%	14.5%	Up 0.8 percentage points
Cash flow from operating activities	$660.4 million	$527.7 million	Up $132.7 million
Construction and acquisition expenditures	$1,640.1 million	$1,633.9 million	Approximately flat
Total assets	$16,700.7 million	$15,426.0 million	Up 8.3%
Long-term obligations, net	$6,190.8 million	$5,506.1 million	Up 12.4%

Utility electric margin, a non-GAAP measure, increased to $1,805.5 million from $1,649.6 million, primarily from IPL and WPL rate-base growth, base-rate changes, lower fuel and purchased-power costs, and transmission-cost effects.
Utility gas margin increased to $233.5 million from $214.3 million, supported by rate changes, higher WPL rate-base earnings, and colder weather.
Electric production fuel and purchased-power expense declined to $776.7 million from $855.0 million, while transmission expense declined to $481.4 million from $495.7 million.
Other operation and maintenance expense increased to $712.2 million from $645.8 million, and depreciation and amortization increased to $567.2 million from $506.9 million, reflecting new projects and higher operating costs.
Alliant Energy's 2019 effective income tax rate was 10.8%, compared with 8.4% in 2018. Production tax credits and regulatory tax treatment continued to materially reduce taxes.

Liquidity, Debt, and Capital Resources

Year-end cash and cash equivalents were $16.3 million on the consolidated balance sheet; cash, cash equivalents, and restricted cash totaled $17.7 million in the cash flow statement.
Available capacity under the $1.0 billion revolving credit facility was $662.6 million, and IPL had an additional $83 million available under its receivables-sale program.
Commercial paper outstanding was $337.4 million; consolidated long-term debt, including current maturities, was approximately $6.24 billion on a gross basis.
Actual debt-to-capital ratios were 55% for Alliant Energy, 48% for IPL, and 48% for WPL, below the 65% covenant threshold.
2019 operating cash flow covered approximately 40% of construction and acquisition expenditures; the balance was funded principally through debt, equity issuance, and other financing activities.
Management expects up to $250 million of Alliant Energy common-stock issuance and approximately $300 million, $350 million, and $300 million of 2020 long-term debt issuance by IPL, WPL, and AEF, respectively.
Alliant Energy expects consolidated debt to remain approximately 55% of total capital and targets a common-stock dividend payout ratio of approximately 60% to 70%. The targeted 2020 dividend increased 7% to $1.52 per share.

Material Changes Versus 2018

Alliant Energy's common-shareowner earnings increased $45.1 million, driven mainly by higher utility earnings from expanding rate bases and rate relief.
IPL's net income available for common stock increased to $284.1 million from $264.0 million; WPL's net income increased to $233.0 million from $208.1 million.
Retail electric sales declined 2% overall, primarily because of cooler summer temperatures and lower IPL industrial demand, but rate increases and lower fuel costs more than offset the volume decline.
Gas sales increased 6.4% overall, aided by colder weather and customer growth.
IPL completed 303 MW of Upland Prairie wind generation and 172 MW of English Farms wind generation in March 2019. Approximately 480 MW of additional wind projects were expected to enter service in 2020.
IPL completed advanced metering infrastructure deployment and installed selective catalytic reduction equipment at Ottumwa Unit 1.
Alliant Energy issued $390.3 million of common stock proceeds in 2019, including settlement of equity forward agreements. It also issued $950 million of long-term debt and retired $256.5 million of long-term debt.
Regulatory assets increased to $1,844.7 million from $1,737.3 million, while regulatory liabilities declined to $1,423.6 million from $1,493.2 million.

Guidance, Outlook, and Management Commentary

Management expects higher 2020 earnings from IPL and WPL rate-base growth and the implementation of IPL's electric and gas rate settlements, partly offset by customer refunds of excess deferred tax benefits.
Management expects 2020 depreciation, amortization, and interest expense to increase because of new wind, distribution, and West Riverside investments and related financing.
AFUDC is expected to decline in 2020 as major projects move from construction work in progress into service.
WPL's approximately 730 MW West Riverside natural gas-fired facility was expected to be completed in the first half of 2020; WPL's estimated share of capital expenditures was approximately $600 million, excluding transmission upgrades and AFUDC.
WPL plans to develop or acquire up to 1,000 MW of solar generation by 2023. Alliant Energy's stated goals include 30% renewables in its energy mix by 2030, a 40% reduction in fossil-generation CO2 emissions by 2030, and elimination of existing coal-fired generation from its energy mix by 2050.
Alliant Energy forecasts approximately $5 billion of capital expenditures over the four years following the filing, including renewable generation, distribution infrastructure, and other generation projects.

Risks, Contingencies, and Unusual Items

Regulatory recovery is a principal risk. Future rate decisions could delay or disallow recovery of fuel, operating, environmental, pension, tax, capital, or retired-asset costs.
Environmental requirements remain uncertain, including greenhouse-gas regulation, the Affordable Clean Energy rule, coal-combustion residuals, wastewater requirements, and remediation of former manufactured-gas-plant sites.
IPL must fuel-switch or retire Burlington by December 31, 2021, and Prairie Creek Units 1 and 3 by December 31, 2025, under its Consent Decree. Management expects material compliance costs to be recoverable from customers.
IPL incurred a $110 million obligation to buy out part of the Duane Arnold nuclear power purchase agreement in September 2020; the amount is expected to be recovered from customers over five years.
Alliant Energy recorded a $4 million pre-tax charge related to IPL's retired analog electric meters and recognized approximately $5.8 million of reserves related to MISO transmission-owner return-on-equity complaints.
FERC reduced the applicable MISO transmission-owner base return on equity to 9.88%; additional customer refunds were expected in 2020, generally without an earnings impact.
Credit ratings were investment grade with stable outlooks. A downgrade could increase borrowing costs, restrict commercial-paper access, or require additional collateral.
The company carries substantial regulatory assets and liabilities; future regulatory decisions could materially affect earnings, cash flows, and asset recoverability.
Other key risks include severe weather, cyberattacks, infrastructure failures, fuel and power-market volatility, construction delays or cost overruns, pension underfunding, collective-bargaining negotiations, and potential liabilities from prior divestitures or guarantees.
Alliant Energy's independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting. The critical audit matter was the accounting and recoverability of regulatory assets and liabilities.

Important Facts for Investors to Verify

Progress, final cost, regulatory recovery, and in-service timing for West Riverside, IPL's wind projects, WPL's wind projects, and planned solar generation.
Actual 2020 rate implementation and customer-refund amounts under IPL's electric and gas settlements and WPL's fuel-rate adjustment.
Debt issuance, refinancing, and maturity management, particularly the approximately $657 million of consolidated debt maturities due in 2020 and the $110 million DAEC buyout payment.
Whether regulatory assets remain probable of recovery and whether future rate cases support the company's planned returns on capital.
FERC's final resolution of MISO return-on-equity rehearing requests and the amount and timing of related refunds.
Actual operating performance and tax-credit utilization, including the ability to use federal net operating losses and tax-credit carryforwards before expiration.
Environmental compliance costs, coal-unit retirement or fuel-switching plans, and potential effects of future greenhouse-gas and coal-ash regulation.
Progress toward reducing leverage while funding approximately $5 billion of planned capital expenditures and maintaining the targeted dividend payout ratio.